New research from Aberdeen Standard Investments and Transport Intelligence shows that Europe’s €870 million* logistics sector is on the cusp of significant change. It shows that the people working in these facilities are vital but that technology is changing the nature of employment, with far reaching implications for the industry and real estate investors committing capital to it.

52% of companies have already invested in technology like data analytics and 32% are utilising the ‘internet of things’. The survey suggests that the sector could be at an inflection point in terms of the adoption of technology with barely 10% already investing in robotics but fully 56% planning to in the future.

The survey also suggests that while 25% have invested in warehouse automation, a further 43% intend to invest in it in the future. Automated technology is already the most important feature for new facilities, according to the survey.

It also demonstrates that the nature of work in such facilities could be set to change. At the moment 11 million** people work in the logistics and transportation sector in Europe, with many working in low-skilled highly manual roles like picking, sorting and moving goods.

The size of that labour force could shrink with 47% of respondents saying that warehouse automation will impact the amount of labour required to operate facilities. 42% and 36% said that robotics and the internet of things respectively would impact their labour requirements, switching labour skills from ‘low-skilled, highly manual’ to ‘highly qualified IT staff’ to run the technologically advanced distribution centres.

But the survey also showed that human workforces remain critical. 48% of respondents said labour was the cost they are most sensitive to and 60% of companies are undertaking initiatives to improve working conditions.

As facilities become more sophisticated, the need will be greater for more highly skilled workers who are able to service and maintain the increasingly specialist equipment. This may account for why respondents said that accessing low cost labour is relatively less important to them. When asked what feature is the most important for a facility, low cost labour ranked sixth. This fundamentally shifts the drivers of location, which could have profound impacts on the logistics real estate market.

The survey also indicates that the European logistics sector will continue to see growth in the years ahead, with 34% of respondents saying they do not have enough capacity to satisfy customer demand over the next one to two years. A further 39% said that a lack of available, efficient logistics facilities were hindering their business’s growth.

“This survey is a clear illustration of both the extent and nature of growth that we are likely to see in this industry in the years ahead.

“There is an inflection point approaching where logistics becomes much less about generic sheds employing low-skilled workers and much more about high-skilled workers working with increasingly sophisticated technology.

“Location is already fundamentally important in terms of being close to transport and consumers, and the survey shows this. Yet as we reach this inflection point, ensuring companies can access and retain those with the skills to service the technology will further define what is regarded as an optimal location.

“This has deep implications for local, regional and global supply chains. But it will also have implications for investors in real estate who are allocating to logistics. There is clearly going to be more demand for space that can exploit a location near consumers and transport; but also that can capitalise on highly skilled workers.”

Proximity to consumers and the transport network ranked as the second and third most important feature that respondents want from logistic facilities.

The survey was conducted for Aberdeen Standard Investments by Transport Intelligence between November and December 2018 and is based on the responses of 123 supply chain executives from 29 European countries.

Case study

Amazon, courtesy of the e-commerce company’s acquisition of Kiva Systems in 2012, is pioneering the use of robotics and Automated Guided Vehicles (AGV). Kiva Systems specialised in the production of AGV which support the picking process by bringing shelves to human pickers, thus cutting down on the journey time of the latter. This has had the impact of significantly improving the efficiency of the fulfilment process within the facilities which have adopted the technology.

According to analysis by Deutsche Bank, Amazon facilities utilising the AGVs have been able to reduce the time it takes for an order to be shipped by over 75%, down to 15 minutes. Aside from this, the use of these robots has proven successful in addressing one of the major problems associated with e-fulfilment operations; the use of space, which has been discussed at length throughout this report.

Each AGV-equipped warehouse (only a select few use them currently) has reportedly shown the capability to hold 50% more inventory per sq ft than Amazon’s conventional facilities.

Taken together, these advances convey tremendous cost savings (20% operating cost reduction per facility), and form a significant competitive advantage for Amazon.

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